Home News MEM industries: economic recovery continues
Contact Person  Ivo Zimmermann Ivo Zimmermann
Head of Unit
+41 44 384 48 50 +41 44 384 48 50 i.zimmermannnoSpam@swissmem.ch

MEM industries: economic recovery continues

In the first half of 2010, companies in Switzerland's mechanical and electrical engineering industries (MEM industries) benefited from the improved economic situation in their key markets, posting a higher level of both domestic (16.7%) and international (14.8%) new orders. Nevertheless, due to the negative sales performance year-on-year (­5.0%) and the strong Swiss franc, the situation remains difficult and companies are cautious in their long-term guidance. Furthermore, the companies of the Swiss MEM industries are firmly opposed to the excessive, additional burden that would be placed on employers and employees should the proposals to reform the unemployment insurance system be rejected.

Although the general improvement in the economic situation in the first half of 2010 had a positive impact on order books, sales have not yet bottomed out: Total sales of Swissmem’s reporting members were 5% below the previous year's level, with a slight improvement being achieved in domestic business (1.2%) in contrast to international business (-6.8%).

The same picture emerges if we look at the second quarter of the year alone. During this period, new orders from abroad (+9.1%) and from Switzerland (11.8%) continued to develop positively. Nonetheless, international sales fell by 7.2% while domestic sales rose by 6.9%. All in all, this resulted in a 4% drop in the total sales of Swissmem's 290 reporting members in the second quarter of 2010.

Varying export dynamics
According to figures published by the Swiss Directorate General of Customs, the trend in goods exports of the individual subsectors varied very widely. In metalworking in particular (22.5%), considerably more goods were exported in the first half of 2010, while last year's levels were only just exceeded in mechanical engineering (1.9%) and precision instruments (1.5%).

The market situation improved in all export regions. More goods were delivered to the European Union (3.2%), the USA (7.9%) and Asia (13.0%). Exports to Germany (which purchases more than a quarter of the entire exports of the Swiss MEM industries) increased by 6.4%, while exports to China (the largest Asian market, accounting for 5.2% of exports) were boosted by 25.4%.

In view of the rising levels of incoming orders since the beginning of 2010, companies expect higher sales in the second half of the year. In particular, further growth stimuli are anticipated from the German, US and Chinese markets. It remains to be seen how sustainable the current economic recovery really is, as considerable uncertainties still abound in the global economy and among our member companies.

In the second quarter of 2010, industry capacity utilization stood at 79.4%, which is considerably lower than the long-term average of 86%. In total, the MEM industries employed 327,896 FTEs at the end of March 2010, which is a 5.1% reduction compared to last year.

Avoiding larger cost structures
Alongside the still unsatisfactory business situation, high margin pressure and further cost increases are also impacting on companies’ performance. The strong Swiss franc, which has appreciated by around 10% against the euro since the beginning of the year, is making it much more difficult for Swiss companies to offer competitive prices, and is forcing them to optimize their cost structures wherever possible. These efforts are in contrast to political proposals that would entail additional, excessive burdens for companies.

Swissmem is convinced that a well-functioning unemployment insurance system is crucial to securing Switzerland’s status as a centre of industry. The companies in the MEM industries are therefore prepared to accept the 0.2% rise in the unemployment insurance contribution and the reintroduction of a solidarity contribution to be paid by those in the top wage brackets.

If the proposal is rejected in the referendum on 26 September, the costs to employers and employees will be far higher, resulting in an additional worsening of the operating environment. For this reason, the companies of the Swiss mechanical and electrical engineering industries say a resounding «YES» to the reform of the unemployment insurance system.

Press Diagram «New Orders MEM industries»
Zurich, 25 August 2010

For further information, please contact:

Ivo Zimmermann, Head of Communications
E-mail: i.zimmermannnoSpam@swissmem.ch

Tel.: +41 (0)44 384 48 50

Mobile: +41 (0)79 580 04 84